We study the effects of a court decision granting creditors the power to force into bankruptcy corporate debtors whose liabilities exceed their assets even if they are current on their payments.
We find that bond (stock) prices responded positively (negatively) to the court ruling and that firms affected by it did not reduce their risk, but increased their net worth through equity injections and aggressive accounting. As a result, the informativeness of these firms’ financial reports decreased. We conclude that the benefits from some measures of creditor empowerment may be mitigated by borrowers’ incentives to present overly-optimistic financial reports.
We assemble cash flow data on all investments by Israeli pension providers in private equity and venture capital funds over nearly 20 years to evaluate...
The large companies that currently file for Chapter 11 look very different than the typical Chapter 11 cases of the past. The liability side of debtors’...
The recent bailout of Credit Suisse is noteworthy for many reasons. One of them is that, while AT1 bondholders were wiped out, shareholders were not. This...
Larger-than-life corporate leaders, who can move fast and disrupt entrenched players, are often perceived as having the vision, superior leadership,...